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Bull Of The Day: Kemet (KEM)

Kemet Corp (KEM - Free Report) was the Bull of the Day back on July 25 and at that time I noted the stock traded at a 18x forward multiple yet had some great growth potential. At the time the stock was priced at just under $17, today I see shares trading over $25 and I believe they are headed higher still.

Kemet Corporation, together with its subsidiaries, manufactures and sells passive electronic components under the Kemet brand worldwide. The company operates through two segments, Solid Capacitors, and Film and Electrolytic. Its products include tantalum, multilayer ceramic, film, electrolytic, paper, and solid aluminum capacitors, as well as EMI filters. The company offers its capacitors for use in the automotive, communications, computer-related, industrial, consumer, military/aerospace, and alternative energy industries. Kemet Corporation sells its products to original equipment manufacturers, electronics manufacturing services providers, and electronics distributors. The company was founded in 1919 and is headquartered in Simpsonville, South Carolina.

Earnings History

Since the previous Bull of the Day article ran, KEM posted another solid quarter. The company beat the Zacks Consensus Estimate of $0.18 by $0.14 for a 77% positive earnings surprise. This was the fourth consecutive beat of the Zacks Consensus Estimate.

The stock traded lower following the report and that could have been due to the top line miss. The company reported $274M in revenues when $281M were expected.

The next earnings report has more lofty expectations, with analysts looking for $299M on top and a $0.43 on the bottom line.

Earnings Estimates

Back In July, the Zacks Consensus Estimate was calling for $0.54 in EPS for 2017. The next month that number nearly tripled to $1.50. In the first few days of October, the estimate has again inched higher to $1.52. This is an impressive move higher.

The 2018 number also saw a big move. The Zacks Consensus Estimate was at $0.76 in July and then jolted higher to $1.57 in August and has moved to $1.61 here in October.

Valuation

Last time KEM was the Bull of the Day I noted that it traded at 18x forward estimates and that was below the 20x industry average. Despite the stock moving substantially higher, the multiple has actually moved lower. KEM now trades at 16.6x forward estimates while the industry average has moved higher to 21.4x. The other metrics we look at, like price to book and price to sales both show the stock trading at a discount to the industry average as well. The price to book multiple is 3.1x for KEM, below the industry average of 3.4x and the price to sales multiple at 1.4x is below the industry average of 1.6x.

Kemet Corporation Price and Consensus

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

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